Australian Dollar remains firm on firm RBA interest rate hike prospects

• The Australian Dollar continues to capitalize on fresh escalation in hawkish RBA bets.
• A faster-than-expected Australian CPI growth has prompted hawkish Fed bets.
• The US Dollar trades higher, while investors await Fed Warsh’s speech.

The Australian Dollar (AUD) is up 0.1% at around 0.7180 against the US Dollar (USD) during the European trading session on Thursday. The Aussie pair remains firm this week due to continued outperformance by the antipodean.

The Australian currency strengthened as financial markets increase hawkish Reserve Bank of Australia (RBA) bets, following the release of the hotter-than-expected Australian Consumer Price Index (CPI) report for July.

RBA hike risk lingers as Australia inflation beats forecasts, lifting AUDUSD

Strategists at OCBC Bank highlight that the latest Australian inflation data were firmer than anticipated, with "Australian headline inflation eased from 3.8% YoY in June to 3.5% YoY in July, while trimmed mean inflation held steady at 3.6% YoY." They note that "both measures came in above market expectations," and point out that "the RBA is targeting an average trimmed mean inflation rate of 3.3% YoY in 2H26, making July's reading an unhelpful start to the second half of the year."

Against this backdrop, persistently firm inflation continues to keep the risk of another rate hike on the table." Market pricing has shifted accordingly: "following the inflation release, markets fully priced an additional 25bp hike by February 2027, up from around a 70% probability beforehand." OCBC adds that this repricing "has helped AUDUSD retest resistance in the 0.7180-0.7200 range."

However, the bank OCBC holds a contrary view to market expectations. “Our base case remains that the RBA has reached the end of its tightening cycle,” OCBC added.

Meanwhile, the US Dollar also trades higher, with investors turning cautious ahead of Federal Reserve (Fed) Chairman Kevin Warsh’s speech at the Jackson Hole Symposium on Friday.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.1% higher to near 98.22.

AUD/USD Technical Analysis

In the daily chart, AUD/USD trades around 0.7179, extending its advance above the 20-day exponential moving average (EMA) at 0.7100, which now underpins a constructive near-term bias. The rising EMA suggests the short-term trend remains pointed higher, while the Relative Strength Index (14) at 68.5 hovers just below overbought territory, hinting that bullish momentum is strong but approaching stretched conditions.

On the downside, immediate support is located at the 20-day EMA near 0.7100, where a deeper pullback would be expected to attract buying interest while the broader bullish structure holds. With no nearby technical resistance levels from this dataset, the pair’s topside remains open, although the elevated RSI warns that fresh gains could become more measured as the rally matures.

(The technical analysis of this story was written with the help of an AI tool. Know more.)